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Jefferson’s financial legacy

Economists have not-as a general rule-been kind to Jefferson or his financial legacy, preferring instead Hamilton for stabilizing the nation’s weak post-war finances and Adams for avoiding costly commercial or military conflict. They have a point, and even sympathetic historians have been hard pressed to justify Jefferson’s trade policies and occasionally irrational fears of the banking system and paper money.

Jefferson scarcely could have conceived of the complicated way that business operates in the 21st century. Still, perhaps our present economic crisis — generating as it has suspicion of the finance sector and threatening to pass on trillions in debt to future generations — might make Jefferson’s ambiguous thinking more understandable and some of his ideas and actions more pertinent.

First, though Jefferson famously stated that “most bad government results from too much government,” he did not assume — contrary to libertarian portrayals of him — that government had only a negative role in achieving the public good. Jefferson hated wasteful spending, but he believed that a healthy democracy required that elected officials actively protect the people’s welfare by regulating against predatory practices and by funding things like public education and, in appropriate circumstances, public works.

Second, though Jefferson often turned to questionable mercantilist ends in an attempt to make trade more fair, his primary goal was freer trade between nations. Free trade would — and here he agreed with his Federalist opponents — increase individual and collective wealth and break down political jealousies. In the midst of a global economic meltdown, it would be tempting for nations to focus on protecting themselves and seeing their neighbors as mere rivals rather than partners. Doing so, however, could lead to a resurgence of the economic nationalism and “jealousy of trade” that Jeffersonians hoped to end.

Finally, Jefferson learned from his successes and many failures that ideology-inspired pragmatism leads to better policies than simple ideology or hasty pragmatism. Let’s hope that politicians from both sides of the aisle can use that insight and that they and their constituents can demonstrate greater personal fiscal responsibility than Jefferson himself was able to.